The effects of competition on the quality of primary schools in the Netherlands

We investigate the impact of competition between primary schools on the quality of education in the Netherlands. Do schools facing more competition in their neighbourhood perform better than schools facing less competition? As a measure of school quality, we look at the performance of pupils at the nationwide standard test (the so-called ‘Cito test’) in the final year of primary education. Since competition is likely to be endogenous to the quality of schools, we use the distance between the school and the city centre as an instrument for the level of competition faced by a school. Using a large range of data on pupil, school, and market characteristics, we find that school competition has a positive significant effect on pupil achievement, although the effect is very small. An increase in competition by one standard deviation (comparable to five additional schools in the market) increases pupil achievement as measured by the Cito test by 5% to 10% of the mean standard deviation, which is less than one point (on the Cito test scale from 500 to 550 points).